Marin Mid-Year Real Estate Report

The Federal Reserve Cannot Crush the Pandemic Lifestyle - Marin Wins

Happy First Days of Summer Dear Friends and Clients,

Note: Understanding the historical similarities and differences between the 2008 and 2022 financial crises may offer insight into why the current market stats may be sustaining long term, despite this last year's aggressive Fed moves.

2008 Recession Recap:

The national economic crisis of 2008 to 2011 shattered our economy and was felt significantly here in Marin. Mass corruption in the home loan industry sent many lending institutions out of business. Single family homes in Marin devalued 25% to 35%, depending on the community (condos more). Many homeowners here in Marin lost their equity and therefore could not obtain a new loan. Short sales and foreclosures were common; occurring even in high end towns like Belvedere and Tiburon. The only sales we saw during that 3 year period were from those who had cash in their pockets looking for a screaming deal.

4 years later in January 2012, with lending opportunities reestablished, the desire and foundation to buy in Marin returned and the market became very strong again. Home values have more than doubled in 10 short years here. This decade also marked a continued descention in residential interest rates towards 3%, which contributed significantly to the continued very high buyer demand. It also enabled established homeowners to refi and lower their payments to all time low rates.

2022 Inflation Crisis Recap:

By the Spring of 2022, residential lending practices had become more relaxed again, bidding wars rose to a frenzy that had eery similarities to 2007 (right before the 2008 crash) and could be felt throughout the housing markets. It became common to see overbids 25% to 50% over list price. As an agent who went through both the 2001 and 2008 crashes, you could feel change is gonna come.

In April 2022, Jerome Powell announced inflation is at 9% and that he must crush it. The Fed imposes 10 straight interest rate hikes in one year...the most aggressive moves ever by the Fed in such a short period. Interest rates skyrocket within months from 3% to 7%. The Fed's hope is to force values down by disabling buyers ability to qualify for the mortgage required to meet market prices, thereby forcing sellers to lower their prices to get their homes sold.

The Fed met their goal short term. Marin did have a comedown in values from the Spring 2022 highs, as well as sales volume by December descended to its lowest ebb since 2008 (as reported in the 2022 Annual Report).

Now in June, 14 months into the harsh Fed moves (vs 4 yrs in the 2008 crisis), a different scenario is playing out.The Covid work from home lifestyle has become a way of life that cannot be forced into submission (so far) through the higher cost of a mortgage. Tech headquarters are still here and techies need and want homes with space for living and work (at present, this has destroyed the condo market in SF, down 39% yoy). Marin home buyers want safety, good schools and natural beauty at their doorstep.

Here's the glitch: sellers have not come forward to meet the buyer demand. Buyers are willing (so far) to pay higher mortgage rates with the intention to refi when the rates come down.

Here are the June 2023 / Mid Year Market Highlights:

- The chart below demonstrates on a 12 month rolling basis, our June inventory and sales volume rests at it's lowest level in 20+ years. Demand way exceeds supply.

- Multiple offers and overbids have become standard countywide as a result of the lopsided effect of high buyer demand not being met with enough homes to buy.

- Marin's median sales price in May rose to just under $1.8 million, from $1,675,000 in April. We rank #2 among all 11 Bay Area Counties.

- Overbids remain not as steep as the extreme levels of Spring 2022, when buyers were in a mad frenzy to buy a home before money got more expensive.

- Mortgage rates show signs of peaking and a 30 year jumbo rate in June can be obtained between 6.00% to 6.25% through several sources (down from +-7% in May).

- Year to date, 9% of all homes in Marin sold at sales prices above $4.0 million. That is a wow comeback folks!

See the charts below.

Unpredictable wildcard: Insurability

Headline news reported two weeks ago that State Farm, the last of the top 5 US insurance carriers that still insured CA, has stopped writing new policies even for long time existing clients; including those in low risk fire and flood areas. Marin, Napa and Sonoma Counties have been dramatically affected.

Much of all three counties can now only obtain new insurance through high risk carriers at substantially higher cost.

This week I represented buyers in Mill Valley on a $1.6 million home (remember the median value is now $1.8 million). The home is designated in a high fire severity zone by the State. Their one year premium is $10,342 on a 1575 sf home, with a dwelling structure valued at $950,000. FYI, owners must now choose a price per square foot rebuild cost. The value chosen was $600.00 a square foot... conservative for our area, pending the percentage of the home needing restoration.

In comparsion, in 2019 I sold a home valued at $4.5 million in downtown Mill Valley, also requiring high risk insurance. At that time the premium was approximately $12,000 for full replacement value on a 3715 sq ft home. If written today that same policy, based on an $800.00 a square foot replacement value (conservative for luxe building), the annual premium is now over $30,000.

Gone are the days of full replacement value OR replacement plus 50% on any new policy. Hold on to your existing policies!

Folks, if there has ever been a time that selling your home quickly at a high price can almost be guaranteed, the time is NOW. This is a moment that favors sellers greatly.

Let's talk. My 22 years of resources and answers are yours for the asking with no obligation.

Wishing you warmer days of summer sunshine and time to savor every minute.

All my best,

Michelle